A house was placed in a living trust. The owner died and the house was sold. I am looking at the Settlement statement. The seller was the trustee of the living estate. My belief is the trust should be filing a 1041 reporting the sale, and then sending out K-1 forms to the benificiaries showing their share of the gain or loss. The trustee just wants the benificiaries to claim the income or loss on their own returns, no 1041 or K-1s. Who is right?
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A living trust is the same as a grantor trust, which also doesnt' require a 1041. I think the house is part of the estate, but doesn't require a separate 1041. -
Living trust
I disagree completely with Unregistered.
The living trust becomes irrevocable at death. Since the residence was sold by the trust, and not by the beneficiaries, the sale should be reported on Form 1041 and then the gain/loss should be passed out to the beneficiaries. I would assume there is probably a loss since the residence got a step up in basis at DOD and there are selling expenses. If this is the final year of the trust, the losses would be passed out to the beneficiaries.
The residence is NOT in the estate. It is in the trust. One of the primary purposes of having a living trust is to avoid having a probate estate.Comment
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Thanks Natiro
Now If feel more sure of my position and more comfortable dealing with my client.Comment
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